Economists argue that the efforts of perfectly competitive firms ultimately result in large benefits accruing to consumers. How is this the case? What about owners of perfectly competitive firms. Do they get any benefits from their efforts in the long run? Why or why not? USE YOUR OWN WORDS

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3 Feb 2023

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Grocery stores and gas stations in a large city would appear to be examples of competitive markets. There are numerous, relatively small sellers, each seller is a price taker and the products are quite similar.

A. Is it possible these markets are perfectly competitive? How could we argue that the firms face a demand curve that is not perfectly elastic? Use the definitions and characteristics of the different market structures to justify your reasoning.

B. How profitable do you expect grocery stores and gas stations to be in the long run?

greycheetah389

1. The long-run equilibrium for a perfectly competitive firm is zero-profit equilibrium. Does this mean that owners of these firms have no income? Explain.

2. How does the price and level of output for a monopolist differ from that of a purely competitive firm? Is this due to differences in the cost of doing business? Do these differences provide a rationale for anti-trust legislation? Explain.

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1. When a firm is in a monopolistic competition market, if the firm sells 25 goods at a product price of $10, what is the marginal revenue per unit of the good sold if it sells 5 additional goods when it reduced the product price to $9.

A. $270 B. $20 C. $4 D. $2.50

2. An article in the New York Times on technology in the 1990s, Michael Lewis wrote, 'The sad truth, for investors, seems to be that most of the benefits of new technologies are passed right through to consumers free of charge.' Lewis meant what when he said the benefits of new technology were "passed right through to consumers free of charge'?

A. In perfect competition, price equals the marginal cost of production. In this sense, consumers receive the new technology 'free of charge.'

B. In perfect competition, consumers place a value on the food equal to its marginal cost of production and since they are willing to pay the marginal valuation of the good, they are essentially receiving the new technology 'free of charge.'

C. In the long run, price equals the lowest possible average cost of production. In this sense, consumers receive the new technology 'free of charge.'

D. Firms in perfect competition are price takers. Since they cannot influence price, they cannot dictate who benefits from new technologies, even if the benefits of new technology being "passed right through to consumers free of charge.

3. 'The perfectly competitive market structure benefits consumers because.

A. Firms are forced by competitive pressure to be as efficient as possible.

B. Firms produce high-quality goods at low prices.

C. Firms add a much smaller markup over average cost than firms in any other type of market structure.

D. Firms do not produce goods at the lowest possible price in the long run.